Retailer loans are a disaster waiting to happen.

US consumers just aren’t consuming, and there’s no relief in sight from Washington. Congress left last Friday for the July 4th weekend, having failed to pass any legislation that would have extended unemployment benefits, supplied tax cuts, or eased credit restrictions for millions of Americans.

On the business-2-business side, credit concerns are keeping some companies from spending. And in the consumer retail economy, while real personal disposable income has been rising for three months, the people with cash are sitting on it. (This is even true of large corporations).

It all adds up to the same syndrome as here in the UK: people are behaving as their commonsense tells them, as opposed to how the system would like them to behave: spend-and-debt.

So instead of front-end price cuts and promotions (which immediately slice margins and drain profits) a lot of US retail multiples have begun supplying and extending their own credit systems. The difference this time is that they’re offering big, all-purpose loans of up to $25,000 – rather than own-label short-term credit. It doesn’t make much money for the retailer: but it puts off profit erosion – and potentially gives the shopper a feeling of greater spending power.

This is really just private sector QE. And like QE, it is pain postponement rather than an ‘answer’: this year’s solution becoming next year’s problem. For governments, the QE downside is inflation. For a retailer unskilled (or unmotivated) about credit scoring, the downside is subprime on a massive scale.

Two lessons from this. It is obviously really bloody out there; and nobody anywhere has the answer to restarting capitalism without simply increasing every consumer’s debt hole.

This – and how to give the banking system back its functionality – remains our economic system’s conundrum: it needs growth at all costs, and it needs consumption at all times. This can’t work for personal finances, and very probably it can’t work for the planet either.

So unless somebody or something wipes out half the global population, this one remains filed under ‘Denial – Too Difficult’.